Diversify or perish. I think this is a quote from HG Wells.
Okay, okay, I know it’s actually “adapting or dying”. But if HG Wells had managed the investment rather than the words, I would have argued, it would have changed that quote to my version.
In fact, you’ve probably heard of this gold bar of investment wisdom. Every investor should be familiar with this, as it is the key to successful investing.
Simple and easy: Never put all your investment eggs in one basket. If the market falls out from under that basket, your nest will crack and spill your savings all over the floor.
I know this is simple advice. You can say that diversification is a smart route, but what exactly should you diversify?
To this question today I have one answer: metal mining companies.
Every investor should be a little exposed to miners, especially small-cap miners, if you like to shoot the quick jumps that most Wall Street usually misses.
It just gives you access to stock price volatility above average. Especially today.
Now many of you may say, “But isn’t it a little risky?”
It could be absolutely. Any sector that sees constant variability (such as crypto-assets) can be a bit risky – but much of that risk is driven by having a plan. This protects you from making knee movements and holding the investment longer than necessary.
You just need the right strategy. And if you don’t have it in place, I’d say you should start looking for it now because the focus is starting to shine through the mining industry as the commodity market recovers.
According to a PwC report published last year, the mining industry came to a turning point in 2016. The 40 major mining companies have amassed a net profit of $ 20 billion – easily exceeding the loss of $ 28 billion in 2015. Meanwhile, their score rose in 2017.
In fact, the market capitalization of these 40 companies grew by 45% in 2016 to $ 714 billion.
And the good news continues for the miners.
Take, for example, gold. Miners are particularly sensitive to rising gold prices now. As gold continues to rise (and will), gold reserves will grow.
It’s time to go long in this area.
In fact, since the beginning of December, the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) has been moving away from the support line for about $ 30. Now it is about 14.8%, a pleasant rally that could develop further if it breaks through the current level.
All of this suggests that if you want to diversify more, Miner is a great bet.